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Venture capital firms are bit like old soldiers. They never really die, they just sort of fade away. And that appears to be what’s happening at Highway 12 Ventures, the 11-year-old Boise venture capital firm which announced today that it will not pursue a new fund and as a result wind down operations over time.

Co-founder Mark Solon wrote in a blog post that there’s a growing “tension” in the venture capital business between managing existing portfolio companies — which are taking longer to exit — and the need to raise more cash to support new investments. He writes:

“The idea of raising a third fund right now (despite genuine interest from both new and existing investors) is hard to imagine given the plate of work our partners have in front of us to create the most value we can in Fund I & Fund II. We are extremely optimistic about our portfolio of companies and believe that they will drive very handsome returns for our investors. Our focus right now is doing the most we can to make that happen.”

We’ve seen other venture capital firms choose a similar course, most notably Frazier Technology Ventures in Seattle. In 2009, it too chose not to raise a new fund and manage its existing portfolio.

Mark Solon

Highway 12 was active in the Pacific Northwest for a short spell after it was founded, co-investing with OVP Venture Partners in Boise’s M2E Power and Portland’s Max Viz. (I bumped into Solon on occasion at Seattle events, and was always struck with his enthusiasm for the startup process).

The firm later focused exclusively on the Rocky Mountain region. (Idaho, Utah, Colorado and Montana).

It was a good niche for the firm, which had a solid reputation and worked hard to build bridges with venture capitalists in other tech centers.

And it was not like there was a lack of activity in the region. Colorado actually attracted more venture capital dollars in the first half of this year ($277 million) than Washington state ($249 million).

The firm’s portfolio included @Last Software — which was acquired by Google — and Logoworks — acquired by H-P.

As The Wall Street Journal notes, it is a bit unusual for a venture capital firm to take such a public approach in announcing its wind down. But Solon said that the firm wanted to notify entrepreneurs and venture capitalists about its status, telling The Journal that they “thought it was a disservice to entrepreneurs in the region to slowly disappear.”

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